is the bubble due to burst?

It would be possible to determine whether or not it is a bubble if you had comprehensive buyer information for all of the 60's and earlier Ferrari sales for the past couple years. If the majority are going to enthusiasts and collectors, then it likely isn't a bubble. If they are going to investors, then it might be more likely to be a bubble, but still maybe not. It would depend on whether the majority are short-term or long-term investors. If it is dealers/brokers or other short-term investors buying them, then it likely is a bubble. If it's long-term investors, however, then it could be the opposite of a bubble since their continuous consumption will make fewer cars available over time (reduced supply results in buyers competing much more aggressively because there are fewer cars). Of course, even long-term investors will have an exit at some point, but because they have the luxury of holding investments long-term, they would be unlikely to flood the market (which is what causes the market to crash).

Regardless of the above, the ~$500k XKE seemed like a bubble unto itself.

 

My planet. I grew up in mainline Philly and lived in Great Falls VA for a number of years. The number of folks with staggering wealth is amazing. I have friends with 2 or more jets 7 homes ect. There has been an explosion of wealth and concentration of wealth in the lasat 20 years that is hard to fathom by most people.

The elephant in the room is syndicates buying these cars, race cars and racing motorcycles for investment. I think about 30% of recent purchases are made by investment groups. Any one with direct knowledge please chime in with the percentage.

 

Two million isn't much. For a total portfolio.

For a car? You have got to be kidding. Unless you live in The United Arab Emirates, two million for a car is unheard of for 99% of the working rich.

 

Phil, The masses are struggling to keep their heads above water while Excutives are being compensated with staggering bonuses and golden parachutes. Two million dollars is a fortune to many. Two million dollars in today's stock portfolio could allow for $160,000 or greater dividends, $160,000 is over 3 times the average household income.

 

Without straying too far into P&R, two million is a huge amount of money to most Americans and while it won't buy much in the blue chip market there are plenty of great cars available to the middle class buyer.

 

This is definitely a key point for this discussion. There are rumors of this happening, but I've never heard of even a single example where it has been confirmed this occurred, so maybe it's just a rumor.

 

Intersting stuff, I'm an old man now, and have seen alot of stuff having to do with these cars over the last 40-45-50 years...so I'm chiming in as an opinionated man, from an aging perspective, who WAS there-that said, I'm NOT pontificating, merely speaking emphatically, as the perspective of time cannot be appreciated until one is old enogh to appreciate the diffraction that that prism deflects on history, and expeiences, as they repeat itself-with some distinct and significant forces-but repeat seemingly, over and over...again and again.

While true, during an un-abated upturn, the correction relating to most peoples' posts' concern's-large volume PRODUCTION, STREET cars, and speaks to their market cap limitations and "the cost of the money/ownership" referenced by another poster.

My own experiences-which started when GTOs were sub-$10,000 cars through the first uptick in the mid to late 70s, throught the mid eighties upturns, culminating in the crash of September/October of 1989, followed by the unprecedented deflation of ALL cars in early 1990s, until the advent of Scott Mcneely and Netscape's IPO where Scott "woke up on a Thursday and found 450 Million in assets value not there on Tuesday," and the subsequent Dot.com stock market millionaire driven buying and resultant re-appreciation, leading to the early new millenium-with loads of cheap easy money in real estate valuations(riches for the "common man")-leading into today's "post banking crash" of '08/'09's "apocolyptic" economy where in there are very little, "tangible assets" where you might park huge stores of "dead cash" into an asset which has an appreciating slope....
In all instances, cases of cars such as 330GTCs roaring to previously unimagined levels is a perfect allegory for the high tides metaphor..

The truth is: YES, as the "rumor/fly on the wall" story has it, there ARE quiet, semi secretive pools of money, within certain groups of billionaires(most of whom, I'm near certain, NONE of the posters has had a conversation with outside of the realm of Ferraris)-if at all-thus, no one has "heard" of, let alone gotten confirmation of, such purported "syndicated" buying activities...why would "they" want ANYONE to know their "bizness?"
Then again...who out there knows of the methods and means these men obtain/"earn" their "grubstake" to begin with?

The simple truth is that: ALL racing cars, almost ALL "coachbuilt" specials, and cars made famous as a mere byproduct of being born in the era known as "the Golden Era of Sports cars", built in low numbers, ie. 4, 6, 18, 33, 4, 2, 3, 15, etc, etc, CAN'T help but eventually fall prey to market forces of high altitude collection.
See Maserati, see Saton Martin, See Porsche 356, see Jaguar e-type, etc, etc...

Drivability is now, no longer as MUCH of a market force as it once was..since the cars are becoming, now, SOOOO expensive/valuable, that owners are becoming ever more reticent about bringing them to events to be raced-in large part due to that guy with the bogus GT-350R clone: made up from a 3 speed, 6-cylider, found in a back yard in Nebraska.
Re-made into a racing car-which it NEVER was-with last months NASCAR, "cheater motor" in it, by a guy diving for the pole-who wants nothing more than to screw with the "idiot billionaire"-with the 30 million dollar Ferrari....(this is worse than people think).

That said, with-in the strata of racing cars, at THIS level, the market IS becoming a bit more discriminating...
YES, there ARE GTOs trading at mind numbing numbers to mere mortals, but the cars(!) which have traded at, or above 50, and the one that's been being shopped around(discretely!) for the last couple/few months for just under 60, these are ALL: A- to A+ examples...
ie, the near best to, arguably THE best examples of the model.
Keep in mind that: there are more than a few examples which have been 'available' for years, and years...but NOT at THOSE prices...
Like all series of cars: there are examples representative of the series, and, there are the "picks of the litter"....
For THOSE examples, when offered to you-if you HAVE the money-you buy the BEST one possible...as in the end, the "market" WILL, always, come to you. ALWAYS.
Think in terms of a 3 cycle hold time. THEY do...

Look at what's been happening with Rodin bronze bust sculptures, French impressionist paintings, Hiroshige lithographs, Dutch master's artworks, ad nauseu...
You CAN'T buy a REAL Ferrari racing car-with Works, or Concessionaire History, at LM, MM, or TdF, etc, for under 10 Million, probably 15...
THAT ship sailed long ago....but not THAT long ago...

The truth is, since these are mostly "dead CASH" acquisitions, there is NO need to sell-EVER...as oppossed to the driving force of overly leveraged, artificially inflated, commercial real estate portfolios-as was the case in Japan in the 1980s.....a huge, huge market force...then.
Thus, there will NOT be a correction factor-in the terms everyone is both thinking and remebers-the paradigm has shifted...in this regard.
Nothing short of a collapse a-la-1929 will turn that clock back...but then, if that happens, there will be real things to worry about-like marshall law...



NOW, with respect to large number production street cars...well...you better like what you paid for, and what you are looking at...because if it tanks, CONGRATULATIONBS! YOUR A COLLECTOR-and you better like what you are looking at as you will not recover the assets in your lifetime-IMO...eventually, but not until we are all worm food!

Basically: an investment is where I park "X" dollars, for "Y" period of time, and expect-DEMAND- to see "Z" profits-period.
Speculation-or passive(nee dumb luck appreciation)appreciation is that I buy at "X" and over and undetermined, unspecified, period of time, HOPE that when I sell, I get "Z" dollars
Operative word being HOPE, as there is nothing more feuling this sort of thing than herd mentality-IMO...and my experience...
When I SPEND money-NONE of the above is a concern-none...I SPENT the money-period.

In 15 years, when gasoline AS we now know it-no longer exists-and requires a permit to run cars like this a few times a year(likely ONLY at a track), what sort of chilling effect do you think this will have on the "value of 3 carb steel short noses?"
Let alone a GTE?
The efffect will be chilling, to put it mildly-oh, and don't think that the taxes won't change on "passive investment" rates-think long term and short term capital gains...class envy is getting stronger with each election cycle, it sounds like to me...

In summation: It is probable that in the not to distant future, there WILL be a class of super historically significant RACING Ferraris, of a variety of models, which will ALL be north of 100 million-deal with it.

As for the notion that that means my alloy, 6c, 275b, interim shaft, 275 will become a 5-10 million dollar car... because its the car closest resembling a 250GTO? Who is to say, the truth probably lies closer to this than I'd like to contemplate-but then again, I didn't buy it because it looked like a "GTO"...as many currently are, but because its the best looking sports car-by far-made in 1966, and aside from NO brakes, its the fastest street car made in production preFIAT-and I've driven almost ALL them, model wise, not sheer totals...(yes, I've had 4, 4-cams also-NO contest...)

You may protest as you might, but I was there, lived through it, made $, lost $, and still LOVE early-mid 60s Ferraris the most, but still, I call my investments: my stocks and assorted holdings in: "The Trust"...less of an opinon, and more of an a experience retrospective...FWIW

MORAL: Buy it because you want it, AND can afford it, and you lust for them, if it's to make money: good luck, but trying to prognosticate this as if it were a financial market-with no regulation I might add-is more luck than even folly IMO...

 

There are ads all over the Euro mags... Googling "Classic Car Fund" produces lots of results...

 

Wow, I need to get out more! The first one in google had a comment from Nick Mason saying these funds are a "very good idea". They probably are a good idea for investors, but they are bad for enthusiasts (IMO).

Ferraris Boost Pink Floyd Drummer's Classic-Car Fund: Video - Bloomberg

 

These investment funds are very common in the art and coin world and have been going on for 40+ years. I know of a couple of investment funds that are private and purchasing racing motorcycles with provenance. The RoI has been very good.

 

Maybe I could have clarified it better by saying total net worth, liqued and hard assets. Like house, autos, yearly income and other investments. Much more orple than you think is at that level, some still in the middle class.

For example, a young couple may buy a 1.5 million house on a 30 year mortgage. They make 160k a year. For all intents and purposes, they are middle class, due to their profit to debt ratio (property tax, car note, school loans, child and expenses)

Such a family are worth 2 million, but most likey can only afford a base BMW 5 series and Hybrid.

To have 2 million in liqued assets (especially to blow on a typically depreciating asset like a car) you have to have in access of 50 million. Far out of reach for most people.

 

Not even close. $2 million invested in any sort of reasonable portfolio is going to allow an annual withdrawal rate of around $40-60k-- probably right around the median household income.

$2 million for a car is absurd, until you think about the number of billionaires. For a person with a net worth of $1 billion, $2 million would be 0.2% of their net worth.

 

Exactly. Most of these investment grade autos are bought by people who are worth far more than 2 million.

 

I think there are 2,700 billionaires

 

That's not the case these days as far as I know, but definitely would be interested in specific suggestions to achieve those numbers. The interest rates are so low that it's difficult to (safely) make meaningful money off of liquid assets these days. That creates even more incentive to pour money into cars and other rare assets.

 

That's a lot more billionaires than 275GTB/4s!

 

Bingo!

 

Multi-family (apartment buildings) real estate, especially institutional grade, are off the charts in major cities. Lot's money chasing low inventory. Competition is fierce. With this asset class being the safest and today's low interest rates, prices are sky high. Why shouldn't other types of tangible assets do well?!

Geno

 

that is the reason there is little to worry over the valuations of anything,,, there's the cliche' about a rising tide lifting all ships... all asset classes are experiencing ever high valuations...
it is their breadth and width with help from government intervention in their various currencies... as the FED has been printing 85B monthly for a long time in stabilizing efforts all the while diluting / devaluing the currency, affecting valuations, currencies and governments world wide

 

DK Engineering just tweeted they have 4 275s currently in for restoration. If this is a bubble and it bursts there will be a lot more restored cars at the end of it than when it began.

Whether that's a good or bad thing is probably a different discussion.

 

There is a LOT of wisdom in 355's post, I love that guy!

 

Over the past couple years 13% has been realized in a number of investment vehicles. A constant return of 8% or greater can never be assured but even at 4-7% it's enough of a cash flow for many.

The government publishes an average annual income.

It amazes me how many are holding jobs that pay 20-30 dollars/hour.

Regardless of how many billionaires there may be or how much money the typical Ferrari owner may have, two million dollars is more than a dream for most.

 

I think you meant 335S' post.

Agree on the wisdom part.

 

Thanks. I definitely would like to hear more about even the 4-7% range. I don't want to distract from the focus of this thread (though the discussion is related), so I started a thread in B&I to specifically discuss the topic of parking money: http://www.ferrarichat.com/forum/business-investments/431307-where-do-you-park-money-these-days-near-zero-interest-rates.html